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Semiconductors - Government blocks sale of firm

The government yesterday (17 November) announced it was blocking the takeover of the UK’s largest producer of semiconductors by a Chinese-owned subsidiary due to a “national security” risk.

The Department for Business, Energy and Industrial Strategy (BEIS) called on Nexperia, which bought Newport Wafer Fab for £63m in July 2021, to sell at least 86% of its holding.

A final notice publication said the secretary of state considers the risk to national security relates to “technology and knowhow that could result from a potential reintroduction of compound semiconductor activities at the Newport site, and the potential for those activities to undermine UK capabilities”.

Nexperia is based in the Netherlands, but is owned by China’s Wingtech. Nexperia Newport, its Welsh subsidiary, makes chips that are used for power management in electronic devices.

A threat to jobs

According to the Guardian, the decision will raise questions over the future of the jobs of 550 workers in Newport as well as those of the 1,000 people at another Nexperia facility in Stockport.

The move, made under the National Security and Investment Act, comes amid ongoing tensions between the West and China, and follows a move to block Chinese state-backed enterprise Huawei from the UK’s 5G network in 2020.

According to the Telegraph, Nexperia’s business plans for Newport included ramping up production for its own chip designs, which would have shut out other customers who had previously used it as a contract manufacturer of their own chips.

Toni Versluijs, head of Nexperia UK, said the company was shocked and would appeal the decision, reports the BBC.

Disproportionate action

“The decision is disproportionate given the remedies Nexperia has proposed. It is wrong for employees, the UK semiconductor industry, the UK economy and the UK taxpayer - who could now be faced with a bill of over £100m for the fallout from this decision,” he said.

In its decision, the government said the takeover of Newport Wafer Fab created two risks to national security, namely undermining UK capabilities in producing compound semiconductors, and facilitating access to technological expertise in the area’s semiconductor cluster.

The review has prompted two British chipmaking executives to express interest in buying the company if Nexperia’s purchase is blocked.

German and Italy block Beijing

Concern over Chinese influence in chip production has prompted the German government to look at blocking a takeover of Elmos, a Dortmund-based chip factory, by Silex, a Swedish company owned by Chinese group Sai Microelectronics, reports Reuters.

The decision will come just days after Olaf Scholz made his first visit as chancellor to Beijing and highlights increasing concerns over the security of western semiconductor technology and supply chains, reports the FT.

Robert Habeck, Germany’s economy minister, said “Chinese investments in critical sectors will have higher hurdles to clear”.

Last year, Italian PM Mario Draghi said he backed an extension of state protection for Italian businesses, after revealing that his government had blocked a Chinese takeover of a semiconductor company, reports Autonews.